KNR Constructions Navigates Headwinds, Eyes Strategic Growth in Q2 FY26

KNR Constructions Limited, a prominent player in India's infrastructure sector, recently announced its financial results for the second quarter and first half of fiscal year 2026. The company is navigating a period marked by industry-wide sluggishness in project awarding and execution, yet it remains focused on strategic growth and diversification. Despite a challenging environment, KNR Constructions reported a consolidated revenue of INR 646.5 crores for Q2 FY26, with a robust EBITDA of INR 192.56 crores, translating to an EBITDA margin of 29.8%. The Profit After Tax (PAT) stood at INR 104.63 crores, achieving a PAT margin of 16.2% for the quarter. For the first half of FY26, the consolidated revenue reached INR 1259.23 crores, with an EBITDA of INR 375.51 crores.

The company's performance in Q2 FY26 reflects a mixed bag of challenges and strategic maneuvers. The management acknowledged that project awarding activity by both the Ministry of Road Transport and Highways (MoRTH) and the National Highways Authority of India (NHAI) was sluggish. Furthermore, execution activities were muted due to extended monsoon conditions across various parts of the country. This environment has naturally led to a slower pace of order book conversion. However, KNR Constructions is actively working to mitigate these impacts, with a strong focus on operational efficiency and strategic bidding.

Segmental Performance and Order Book Dynamics

The segmental revenue split for Q2 FY26 highlights the company's diversified operational base. HAM projects contributed 29% to the revenue, while EPC Roadwork accounted for 34%. Irrigation projects were a significant contributor at 36%, and back-to-back projects made up the remaining 1%. This diversification helps KNR Constructions manage risks associated with any single segment. As of September 30, 2025, the company's total order book stands at INR 8747.8 crores. This order book is strategically diversified, with road projects (HAM & EPC) accounting for 29%, irrigation for 18%, pipeline for 12%, and mining for a substantial 41%.

Management has provided clear guidance on future order inflows, targeting approximately INR 8,000 crores to INR 10,000 crores by the end of FY26. This target includes a mix of NHAI, irrigation, and other state government projects. The existing order book, excluding mining projects, is expected to be executed over the next 1.5 to 2 years. The company is also exploring new business verticals, such as solar energy projects, actively observing bids related to battery expansions and solar energy stations. This move is a strategic step towards diversifying revenue streams and tapping into emerging infrastructure opportunities.

Strategic Initiatives and Future Outlook

KNR Constructions is actively engaged in several strategic initiatives to bolster its market position. The NHAI's tightening of RFP provisions is seen as a positive development, ensuring that projects are awarded to contractors with proven technical and financial strength. This move is expected to benefit established players like KNR Constructions by reducing competition from less capable bidders. Additionally, the government's continuous focus on large-scale infrastructure development, including plans for new greenfield expressways and significant investments in road links, presents substantial future opportunities.

One notable development is the progress in asset monetization. The company's monetization of four assets is in an advanced stage, with the SPA draft circulated and expected to close by the end of November 2025. This initiative is anticipated to recycle capital and strengthen the company's financial position. On the operational front, KNR Constructions has received provisional completion certificates for two HAM projects, KNR Ramanattukara Infra Private Limited and KNR Guruvayur Infra Private Limited, effective July 18, 2025, and July 17, 2025, respectively. This demonstrates the company's ability to deliver projects on time.

Despite the current low order book, which is expected to impact near-term revenue for the next 3 to 4 quarters, the management remains confident in achieving an EBITDA margin of 13% to 14% for new projects. The company's robust in-house construction equipment and execution team, coupled with its diversified client base and proven track record, position it well to capitalize on the anticipated pickup in infrastructure spending. KNR Constructions is committed to disciplined execution and strategic expansion, aiming to return to its peak performance levels within the next 3 to 4 quarters, driven by a strong pipeline and proactive engagement in new opportunities.